Insights from BCC Research

Foxconn Taps India for $5 Billion Commitment to Build Factories

Foxconn, the world’s largest contract manufacturer of electronics by revenue, announced it will invest more than $5 billion within the next five years in the Indian state of Maharashtra.

Terry Gou, Foxconn’s CEO, signed a memorandum of understanding with Maharashtra’s chief minister last month in Mumbai, the state’s capital.

The Tawian-based tech firm manufactures devices for Apple, Blackberry, Motorola and other global brands. The announcement signals the device-maker’s intent to diversify from a softening economy and rising labor costs in China, the firm’s main manufacturing base.

According to Gou, the company would employ 50,000 people in a facility that focuses on manufacturing, research and development. As reported in the Wall Street Journal, Foxconn’s pledge represents the largest foreign direct investment deals in Indian corporate history, tripling the country’s total over the past 15 years.

Business Standard reported Foxconn is considering both “assembling in the country,” as well as bringing over the “entire supply chain" within 10 years. India is already the fastest-growing smartphone market in the world. In 2014, its electronics imports totaled $33.5 billion. By 2020, the country is expected to spend $400 billion on electronic goods, including smartphones, smart television sets and wearable devices. Import and local manufacturing expenses will total $300 billion of that expenditure.

At a news conference in New Delhi last month, Gou said Foxconn would produce mobile devices, televisions, electronic products, batteries and key electronic components. But the Indian government has to address infrastructure deficiencies, he said, citing issues such as electricity and transport.

The announcement is boost for the government’s “Make in India” program, which aims to turn the sub-continent into a manufacturing powerhouse. Prime Minister Narendra Modi intends to bolster India's manufacturing base, create jobs and reduce his country's reliance on imports.

According to Dow Jones Business News, “Mr. Modi's goal is to increase India's manufacturing output to 25% of gross domestic product by 2022, up from around 18% now. By way of comparison, manufacturing represents 31% of China's GDP, according to the latest figures from the World Bank. The Indian government hopes a manufacturing boom will help generate millions of new jobs.”

Foxconn, the trade name for Hon Hai Precision Industry Co., employs about 1.3 million people at its during peak production times, making it one of the largest private employers in the world.